An Incentive Approach to Identifying Financial System Vulnerabilities

December 1, 2000

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper underscores the importance of the assessment of incentives of the main agents in a financial system as a key element in the analysis of financial system vulnerability and the surveillance over the financial system. We outline a diagnostic approach for the assessment of incentives. This approach highlights the need for additional research on the relationship between institutional structures and financial vulnerabilities.

Subject: Banking, Deposit insurance, Environment, Financial sector policy and analysis, Financial sector risk, Legal support in revenue administration, Moral hazard, Revenue administration, Tax incentives

Keywords: adverse selection, adverse selection problem, Asia and Pacific, asymmetric information, bank, bank closure, banks' behavior, banks' loan portfolio, borrower, core operation, depositors of bank, Financial sector risk, financial system, financial system vulnerability, incentive assessment, incentive assessments, Legal support in revenue administration, loan portfolio, market, market discipline, market structure, Moral hazard, risk borrower, WP

Pages:
20
Volume:
2000
DOI:
https://doi.org/10.5089/9781451874839.001
Issue:
211
Series:
Working Paper No. 2000/211
Stock No:
WPIEA2112000
ISBN:
9781451874839
ISSN:
1018-5941

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